The state of the suburban Chicago office market

HFF director Bryan Rosenberg is speaking at our 3rd Annual State of the Suburban Office Market conference on September 20. The event features two panel discussions, “State of the Suburban Office Market,” for which Rosenberg is a panelist, and “Reassessing the Suburban Workplace: Keys to Attracting, Retailing Tenants.” The conference begins at 7:30 a.m. on September 20 at the Schaumburg Corporate Center in Shaumburg, Illinois.

Rosenberg has more than eight years of experience in real estate and finance. His primary focus is office investment advisory across the Midwest United States. Throughout his career, Rosenberg has been involved in more than $5 billion in transactions. Register for the event here to hear Rosenberg and a variety of other experts in commercial real estate.

How would you describe the current state of the suburban Chicago office market?

The suburban Chicago office market is a tale of two markets. There has been a flight to quality this cycle, and office tenants are demanding CBD-like amenities and willing to pay for them; however, there are some large vacancies in the market that are challenged by location, floor plate, vintage, etc... that continue to lay vacant.

What influences investor demand for the suburbs?

Most investors are targeting one of two things: high-yield or a contrarian investment. Suburban office as a whole is still experiencing a dearth of interest from institutional capital. For Chicago, that has translated to a flood of private capital searching for yield. The suburbs have also started attracting more nuanced capital that views an investment in suburban office a contrarian investment that will yield outsized returns when institutional capital begins flowing again.

Which suburbs are the most attractive to investors and why?

Suburban locations with access to transit and amenities are thriving. Evanston, Oak Brook, Rosemont, Schaumburg, Naperville and Deerfield are all urban/suburban nodes that provide transit or convenient access, entertainment and dining options and tremendous housing stock. The locations that thrive are the ones creating a CBD experience with suburban ease of access.

Looking ahead, where do you see the suburban Chicago office market going in terms of growth over the next few years?

Suburban Chicago will continue to experience a flight to quality, which will drive rental rate growth. There is limited supply coming online due to a lack of quality land sites as well as increasing construction costs and tight financing. Top-of-market rents are still well below the levels to justify new construction, which continues to constrain supply. Young millennial families will continue moving to the suburbs as they grow their families and search for the best schools. This will cause a new wave of demand that will fuel the market in the coming years.